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Jaguar Land Rover slashing 1,000 jobs and relocating 350 staff should set “alarm bells ringing” in government over its policy towards diesel, according to unions.

Britain’s biggest car maker briefed staff about the cuts on Monday, confirming reports last week that it was reducing production as sales slump.

JLR is not renewing contracts of 1,000 agency staff and moving permanent employees between plants as it reorganises in the face of falling sales.

Last week the company - which has about 40,000 staff - attributed the move to “continuing headwinds impacting the car industry”, though insiders hinted Government policy towards diesel was the main driver.